Risk Management and Crisis Response Blog

The perils of asserting privilege

Apr 8, 2022 7 MIN READ
Alexander Cobb

Partner, Disputes, Toronto

Marleigh Dick

Associate, Litigation, Toronto

Carrie D’Elia

Partner, Tax, Toronto


Canadian courts — up to and including the Supreme Court of Canada — have confirmed that solicitor-client privilege is a substantive right, afforded “quasi-constitutional” protection.[1] Nonetheless, the decision to assert and defend privilege claims can raise complex reputational and strategic issues. Regulators, tax authorities and civil litigants are increasingly aggressive in challenging claims of privilege, and in seeking severe sanctions where, in their view, a party has improperly claimed privilege. Litigants must carefully navigate this minefield to ensure that privilege claims are made in good faith, are valid and defensible and also take into account the potential consequences of waiver.

Privileged communications

The concept of solicitor-client privilege in Canada protects communications made for the purpose of seeking or receiving legal advice. Solicitor-client privilege belongs to the client (not the lawyer). In addition to solicitor-client privilege, there are other privileges that receive robust protection under Canadian law, such as litigation privilege and settlement privilege. In all cases, privilege can only be waived by the party who “owns” the privilege, and such a waiver must be voluntary. It is possible for governments to pass legislation requiring the production of privileged communications, but such legislation must be clear, explicit and unequivocal. In civil litigation, rules of court consistently affirm that parties are not required to produce privileged communications or to answer questions that would require the disclosure of privileged communications.

A party facing a production order or engaged in a discovery process ordinarily identifies the documents that are privileged, identifies them in general terms and is ordinarily entitled to withhold them from production. However, as noted above, there are a host of practical and reputational concerns that can turn what may seem a simple matter into a minefield.

Identifying what is and is not privileged

In modern litigation, identifying privileged documents can involve a review of many thousands of documents. Given that privilege is a very contextual matter, a careful review may be required to determine whether a document contains legal advice or involved communications made for the purpose of obtaining legal advice, was prepared for the dominant purpose of litigation, or contained an offer of compromise or settlement. The context required to determine whether a particular communication is privileged may not be apparent on the face of the document itself, and may become apparent by reference to other documents. Where there are potentially thousands of documents involving counsel (in-house counsel, in particular) such a review can be extremely expensive and time-consuming. However, if a party does not perform a thorough review, a blanket assertion of privilege can be difficult to defend, and may give rise to an accusation that privilege is being used improperly to shield non-privileged communications. If that accusation is substantiated, the perception that a party has been seeking to hide something can taint a court’s or a tribunal’s perception of that party when it comes time to determine the case on its merits. This can be a significant concern if credibility is an issue in the underlying dispute.

The process is further complicated by the fact that the law on privilege can vary between jurisdictions. What may be considered privileged in Canada may not be in the United States and vice-versa. There may also be a need to consider the law of privilege in Europe, which may not be the same as in North America (see, for example, the Azko decision, in which legal professional privilege was held to apply only to external counsel, not in-house counsel, unless certain exceptions apply). It is important that companies understand jurisdictional differences in how privilege is applied when navigating cross-border issues. See our discussion in the context of cross-border investigations, in particular, in a previous blog post.

Meeting the burden for a privilege claim

Where there is a dispute over whether privilege has been properly claimed, the matter is often decided in a public forum such as a court or a tribunal. The burden for demonstrating that privilege exists typically falls on the party claiming privilege, and it is often a company representative who will provide supporting information by way of affidavit to support a privilege claim. This exposes both the company and the individual to the potential for reputational harm if the privilege claim is not upheld.

Relationships with regulators/tax authorities

It is not uncommon for privilege issues to arise in contexts where companies have ongoing relationships with the party seeking production. For example, a CRA auditor’s audit query or a relatively routine inquiry from staff of a securities commission may seek communications that are protected by privilege. In these circumstances, the party receiving the request must balance the desire to maintain a good working relationship with the auditor or staff with the need to protect privilege. The nature of such relationships is a valid consideration, and they can be damaged quickly if it appears to the party making a request that privilege is being used to prevent them from doing their job. However, when deciding whether to disclose certain documents, parties must be mindful that the consequences of waiving privilege may extend beyond the context of that particular issue and, therefore, caution must be exercised.

Reputational considerations

In cases where privilege battles are given profile by the media and scrutinized by the public, privilege issues tend to be presented in relatively stark terms: a company is associated with the allegation that they have been “hiding behind” privilege or “evading” their responsibilities. Stakeholders and the general public may be left wondering what kinds of communications are being hidden behind a company’s privilege claims. Companies should be diligent and balanced in their approach to claiming privilege.

Impact on the progress of the substantive litigation

Disputes relating to privilege claims are sometimes unavoidable and can add significant time and delay to the progress of the underlying litigation. See the recent decision of the Federal Court of Australia in Commissioner of Taxation v. PricewaterhouseCoopers, [2022] FCA 278, where the Australian Commissioner of Taxation disputed privilege claims over approximately 15,000 documents involving communications between members of a multinational corporate group and a multidisciplinary partnership that provided both legal and non-legal services. The Court decided in December 2020 to proceed with a review of a sample of the disputed documents. A decision regarding the sample documents was rendered March 25, 2022, a delay of approximately 16 months.

Waiver of privilege

In light of the prospect of significant delays to the progress of litigation and other issues associated with privilege disputes noted above, litigants may be tempted to waive privilege rather than face the potential issues which can arise from a contested privilege claim. However, litigants should be extremely careful about waiving privilege because once privilege is waived, it is typically waived against everybody and it cannot be un-waived. Generally, once privileged information has been disclosed to a third party, it is no longer protected from disclosure to anybody else (except in certain cases where the privilege holder was legally compelled to produce it). In addition, Canadian litigants are generally prevented from claiming solicitor-client privilege over communications once the privilege over that legal advice has been partially waived. For example, waiver of privilege relating to a legal opinion could result in a determination that all communications for the purpose of obtaining the legal advice ultimately reflected in that opinion, or touching on the same subject matter, are no longer subject to privilege. This is further complicated by the fact that the concepts of selective or limited waiver of privilege vary considerably between jurisdictions.

As noted above, conducting a review of relevant electronic documents for privilege and confidentiality can be very costly and time consuming. However, over-disclosing and hoping to claw back inadvertently disclosed privileged documents is not a safe alternative to a careful, up-front review. Parties must employ reasonable, good-faith efforts to detect and prevent the production of privileged materials.[2] If they do not, there is a risk that they will be found to have waived privilege even if that was not their intention.

Managing the risks

Confidentiality of privileged communications is something that companies ought to guard zealously. Potential negative press or delays to the progress of litigation resulting from privilege disputes may be temporary setbacks on the path to trial, but a loss of privilege transcends concerns of the moment. In order to manage the potential pitfalls associated with claiming privilege, companies should take care to ensure that their document retention and other policies are not seen to encourage unwarranted claims of privilege. Such problematic policies may include indiscriminately marking documents as privileged, indiscriminately copying in-house counsel on communications, or withholding all communications with counsel from production without taking additional steps to ensure the communications are privileged. By the same token, privilege reviews should be conducted carefully, so as to avoid a waiver through a lack of diligence. Auditors and regulators should understand that companies want to let them do their jobs and make proper inquiries, but not to invade the sphere of privileged communications. In their communications with the public, companies should emphasize their commitment to meeting their obligations to regulators and the courts. However, making a good-faith claim of privilege and refusing to waive it when asked is not something a company should ever need to apologize for.


[2] See Air Canada v. Westjet Airlines Ltd., 2006 CanLII 14966 (ON SC).